Globalisation in Pharmaceutical Markets: Legal and economic implications of parallel trade
Strategic Management
All those involved in the pharmaceutical and generics industries are feeling the effects of globalisation. Scrip�s Globalisation in Pharmaceutical Markets is the definitive report to enable any company to face the reality of the prospect of increased parallel trade on a global basis with confidence.
The study assesses the need for those operating in the pharmaceutical R&D and generics industries to review their global strategies. With so much turbulence predicted over the next five years, every pharmaceutical company needs the latest information on IP rights, world trade agreements, the workings of GATT, TRIPS and the WTO and the factors affecting global pricing and strategy development.
The report answers, amongst others, the following questions:
Published: May 2001
Pages: 289
Ref: BS1081E
Price: £695/$1,460/¥167,000
For further information about this report, please contact our Customer Helpdesk on:
Tel: +44 (0)20 8332 8965 / 66
Fax: +44 (0)20 8332 8992
E-mail: [email protected]
CONTENTS
LIST OF TABLES
EXECUTIVE SUMMARY
ABBREVIATIONS
CHAPTER 1 INTRODUCTION
1.1 Parallel imports of pharmaceuticals
1.2 The broader context
1.3 This report
CHAPTER 2 ARGUMENTS FOR AND AGAINST PHARMACEUTICAL PARALLEL TRADE
2.1 Introduction
2.2 The legal arguments
2.2.1 What the Treaties say about parallel trade
2.2.1.1 TRIPs Article 28
2.2.1.2 TRIPs Article 6, Exhaustion
2.2.1.3 Violation of intellectual property rights?
2.2.2 The exhaustion of rights doctrine
2.2.2.1 EC doctrine of exhaustion of rights
2.2.2.2 Worldwide doctrine of exhaustion of rights
2.2.2.3 Extended field of application of the worldwide doctrine
2.2.2.4 Concluding remarks on exhaustion
2.2.3 Summary of exhaustion of rights doctrine
2.3 Financial benefits from parallel imports
2.3.1 Health registration data
2.4 The public health argument
2.5 Compulsory licensing
2.5.1 Definitions and application
2.5.2 Compulsory licensing and parallel imports under TRIPs
2.5.2.1 Is compulsory licensing allowed to be (widely) practiced?
2.5.2.2 Arguments against compulsory licensing
2.5.2.3 Balancing the views of advocates and opponents of compulsory licensing
CHAPTER 3 TRIPs ISSUES IN DEVELOPING COUNTRIES
3.1 Introduction
3.2 Access to medicines issues
3.2.1 The Seattle WTO summit
3.2.2 Joint United Nations Programme on HIV/AIDS calls for more resources for AIDS
3.2.3 Drug prices higher in developing world
3.2.4 Call for TRIPs for traditional knowledge
3.2.5 TRIPs and human rights
3.3 Patents, politics and the provision of drugs
3.3.1 The issues
3.3.2 South Africa
3.3.3 India
3.3.4 Brazil
3.3.5 Patent changes coming in Africa
3.3.6 New Zealand
3.4 Round Table on HIV/AIDS, malaria and tuberculosis
3.4.1 The issues
3.4.2 Affordability and national and supranational initiatives to promote it
3.4.3 Industry positions
CHAPTER 4 TRIPs AND ROCHE-BOLAR PROVISIONS
4.1 Introduction
4.2 The EU-Canada dispute case on Bolar
4.2.1 Early working
4.2.2 Stockpiling
4.2.3 Likely implications
4.2.4 EU enlargement towards Eastern Europe
4.3 Recent developments in Roche-Bolar provisions and patent term extensions
4.3.1 The Czech Republic
4.3.2 Poland
4.4 The debate on Bolar provisions in EU legislation
4.4.1 National provisions versus EU legislation
4.4.2 The economic case for Bolar provisions in Europe
CHAPTER 5 US: LEGISLATIVE ACTS ON PHARMACEUTICAL TRADE
5.1 Introduction
5.2 The cost of medicines in the US
5.3 Background to the Pharmaceutical Re-importation Bill(s)
5.4 Proposed US legislation that would permit parallel imports of pharmaceuticals
5.4.1 Bills addressing the issue of parallel trade before the Re-importation Bill
5.4.1.1 HR 3636 (Pharmaceutical Freedom Act of 2000)
5.4.1.2 HR 3240 (Drug Import Fairness Act of 1999)
5.4.1.3 S 1191 (International Prescription Drug Parity Act) (introduced in the Senate)
5.4.2 The Re-importation Bill (MEDS Act (S 2520)) (introduced in the Senate)
5.4.2.1 The background and position of stakeholders
5.4.2.2 The debate on the Re-importation Bill (MEDS Act (S 2520))
5.4.2.3 Amendment No 3925, US Senate, 19 July 2000 introducing the Re-importation Bill
5.4.2.4 Amendment 3927, 19 July 2000 (introduced by Senators Cochran and Kohl)
5.5 Stakeholder views
5.5.1 FDA reactions and concerns
5.5.2 PhRMA
5.5.3 Distributors
5.5.4 Consumers
CHAPTER 6 THE LEGAL HISTORY OF PARALLEL IMPORTS IN THE US
6.1 Introduction
6.2 Trademark and copyright considerations in US imports and exports
6.2.1 The context
6.2.2 The Tariff Act
6.2.2.1 Section 526(a)
6.2.2.2 Customs� interpretation of section 526
6.2.2.3 The K Mart decision
6.2.2.4 Courts have applied Customs� affiliate exception in private litigation
6.2.3 The Lanham Act
6.2.3.1 Section 42
6.2.3.2 Sections 32 and 43(a)
6.2.3.3 Material difference exception
6.2.4 The Copyright Act
6.2.4.1 Section 602(a)
6.2.4.2 Goods manufactured and sold outside the US
6.2.4.3 Goods manufactured in the US and sold for export
6.2.4.4 Circuit conflict created
6.3 The use of copyright to combat parallel imports into the US
6.3.1 The context
6.3.2 The experience of Parfums Givenchy
6.3.3 The Drug Emporium decisions
6.3.4 The C&C Beauty decision
6.3.5 Subsequent enforcement actions
6.3.6 Recent developments
6.3.6.1 Importation of copyrighted products made in and initially exported from the US
6.3.6.2 Court injunction prohibiting importation and sale of copyrighted products not unduly burdensome
6.3.6.3 Implied authorisation to import
6.3.6.4 �Innocent� retailers
6.3.6.5 Sale of copyrighted products in foreign trade zones
6.3.6.6 Transfer to court outside the Ninth Circuit
6.3.7 Other decisions relying on the Givenchy cases
6.4 Conclusions
CHAPTER 7 CONTRADICTIONS IN INTELLECTUAL PROPERTY RIGHTS PROTECTION IN THE US
7.1 Introduction
7.2 Controversy surrounding intellectual property rights protection
7.3 Examples of compulsory licences in the US
7.3.1 The context
7.3.2 Novartis
7.3.3 Dow Chemicals
7.3.4 Upjohn/Pharmacia Aktiebolag
7.3.5 Bayh-Dole Act
7.3.6 CellPro
7.3.7 Sui generis database protection
7.4 Special issues relating to healthcare
7.4.1 Trademarks and smoking
7.4.2 Trademarks and infant formula marketing
7.4.3 Healthcare inventions
7.4.3.1 Ceredase and the pricing new medical technologies
7.4.3.2 Taxol and health registration data
7.4.4 TRIPs, the Multilateral Agreement on Investment and compulsory licensing of healthcare inventions
7.4.5 Price controls v. compulsory licensing
7.4.6 Healthcare inventions present vexing ethical dilemmas
7.4.7 Mechanisms to fund healthcare R&D
7.4.8 Assignment of private rights in healthcare R&D
7.4.9 Government funded R&D
7.4.10 Mandatory reinvestment
7.5 Healthcare and intellectual property - a consumer perspective
CHAPTER 8 JAPAN
8.1 Introduction
8.2 Recent developments in intellectual property rights protection
8.2.1 The context
8.2.2 Patents
8.2.3 Trademarks
8.2.4 Trade secrets
8.2.5 Infringement of patents by parallel imports
8.3 Parallel imports into Japan
8.3.1 Unreasonable restrictions on parallel imports prohibited
8.4 The Japanese Supreme Court about the legality of parallel imports of patented goods
8.4.1 Background
8.4.2 The case
8.4.3 Overview of the decision
8.4.4 Problems created by the decision
8.4.4.1 Reduced competition and public interest
8.4.4.2 Conflicts of law
8.4.4.3 Final remarks on the case
8.5 Implications of the Aluminium Wheel Case
8.5.1 Is the BBS decision an aberration or a model for international IP laws?
8.5.2 Domestic issue
8.5.3 Controversy
8.5.4 Is Japan different?
8.6 Concluding remark
CHAPTER 9 NEW ZEALAND
9.1 Introduction
9.2 The role of Pharmac
9.3 Intellectual property rights protection and parallel imports
9.3.1 Overall trends
9.3.2 The legalisation of parallel imports
9.3.2.1 Medicines
9.4 Pharmaceutical parallel imports: implications
9.4.1 Implications for different stakeholders
9.4.2 A practical example
9.4.3 Winners from the law change
9.4.4 Losers from the law change
9.4.4.1 New Zealand importers, distributors and licensees of copyright products
9.4.4.2 The Commerce Act may trigger renegotiation
9.4.4.3 Issues for New Zealand agents who support imported products
9.4.5 Implications for parallel importers
9.4.5.1 Some products may become unavailable (or unsupported) in New Zealand
9.4.6 Anti-piracy laws continue to apply
9.4.7 Impact of the reform on different stakeholders
9.4.7.1 Authorised distributors or local agents
9.4.7.2 Implications for parallel importers
9.4.7.3 Implications for consumers
9.5 Parallel importation of medicines: reaction by the pharmaceutical industry
9.5.1 The distribution of pharmaceuticals
9.5.2 Output and research and development
9.5.3 Intellectual property rights
9.5.4 New Zealand�s rules
9.6 Conclusion
CHAPTER 10 EASTERN EUROPE
10.1 Introduction
10.2 Enlargement eastwards
10.3 Market performance
10.3.1 Market size
10.3.2 Key pharmaceutical players in Eastern Europe
10.3.2.1 Emphasis on generics
10.3.2.2 Pharmaceutical exports originating from Eastern Europe
10.3.3 Generics firms face fierce competition
10.3.4 Accession and transitional arrangements
10.3.5 Enlargement and generics
10.3.6 Reactions to EU enlargement
10.3.6.1 Intellectual property
10.3.6.2 Healthcare standards
10.4 Regulatory issues
10.4.1 The PERF initiative
10.4.2 Dossier updates
10.4.3 The EU centralised procedure in Eastern Europe
10.4.4 The EU mutual recognition process in Eastern Europe
10.5 Eastern Europe and pharmaceutical parallel trade
10.5.1 Progress with legislation
10.5.2 Parallel trade threat from Eastern Europe
10.5.2.1 Price differentials
10.5.2.2 Price convergence
10.5.2.3 Product-by-product derogations
10.5.3 New proposal to deal with Eastern European parallel trade
10.6 Debate issues in some Eastern European countries
10.6.1 The Czech Republic
10.6.1.1 The context
10.6.1.2 Roche-Bolar provisions
10.6.1.3 SPCs
10.6.1.4 Changes to medicines law
10.6.2 Poland
10.6.2.1 Background
10.6.2.2 The draft industrial property law
10.6.2.3 Dealing with the reference price system
10.6.3 Hungary
10.6.3.1 Background
10.6.3.2 Parallel trade issues
10.6.3.3 Pharmaceutical price deal: pursuit of cost containment
CHAPTER 11 SOUTH AFRICA
11.1 Introduction
11.2 Legal issues
11.2.1 South African Patents Act 57 of 1978
11.2.2 Bolar provisions in the South African context
11.2.3 Pharmacy Amendment Act 88 of 1997
11.2.4 Medicines and Related Substance Control Amendment Act 90 of 1997
11.2.5 The SAMMDRA Act 172 of 1998
11.2.6 The SAMMDRA Act: a critical perspective
11.2.7 Medical Schemes Amendment Bill (1997)
11.2.8 Medical Schemes Amendment Bill (1997): a critical appraisal
11.2.9 The Competition Act
11.2.10 Procurement policy
11.2.11 Preferential procurement policy framework Act 5 of 2000
11.3 Issues related to the implementation of the TRIPs Agreement in South Africa
11.4 Litigation
11.4.1 The SAMMDRA Act
11.4.2 Industry�s response
11.5 Current situation
11.6 Recent developments in the legal challenge to the South African Medicines Law
11.6.1 Ministry of Health position
11.6.2 Industry position
11.6.3 Reaction by other African countries
CHAPTER 12 ARGENTINA AND OTHER LATIN AMERICAN COUNTRIES
12.1 Introduction
12.2 Intellectual property protection: developments since the mid-1990s
12.3 Intellectual property rights protection: a critique
12.3.1 Patents
12.3.2 Copyrights
12.4 Argentina and the WTO
12.4.1 Argentina may modify patent law
12.4.2 Reactions to the Argentine patent law
12.5 Other Latin American countries
12.5.1 The Andean Community
12.5.1.1 Colombia
12.5.1.2 Ecuador
12.5.1.3 Peru
12.5.1.4 Venezuela
12.5.1.5 Uruguay
12.5.1.6 Dominican Republic
CHAPTER 13 BRAZIL
13.1 Introduction
13.2 Intellectual property rights protection
13.2.1 Introduction
13.2.2 Patents
13.2.3 Copyrights
13.2.4 The future
13.3 Brazilian intellectual property rights protection: a critique
13.4 Generics
13.5 The AIDS epidemic and intellectual property rights issues
13.5.1 Brazil�s anti-AIDS policies
13.5.2 Cost concerns and compulsory licensing
13.5.3 The role of patient groups
13.5.4 The role of the medical profession
13.5.5 International collaborative agreements
13.5.6 Exporting technology to less developed countries
CHAPTER 14 ISRAEL & OTHER MIDDLE EAST COUNTRIES
14.1 Introduction
14.2 Market situation
14.3 Israel
14.3.1 Overview of intellectual property rights protection
14.3.2 Amendments to Israeli Patent Law
14.3.2.1 Section 1: �exploitation of a patent�
14.3.2.2 Section 54A: Roche-Bolar provisions
14.3.2.3 Section 64A: Extension of period of protection
14.3.2.4 Implications
14.3.3 Issues in intellectual property protection
14.3.3.1 Data exclusivity
14.3.3.2 Parallel import of patented pharmaceutical products
14.4 Lebanon
14.4.1 Intellectual property protection
14.4.2 �Deficiencies� in the Draft Patent Law
14.4.3 Recent registrations of copy products
14.4.4 Parallel importation
14.4.5 Market access barriers to patented pharmaceutical products
14.4.5.1 Public procurement
14.4.5.2 Regulatory barriers
14.5 Jordan
14.6 Egypt
14.6.1 Government procurement
14.6.2 Intellectual property rights protection
14.6.3 Pharmaceutical price controls
CHAPTER 15 THE PHILIPPINES
15.1 Introduction
15.2 Trade and intellectual property rights related issues
15.2.1 Government procurement
15.2.2 Export subsidies
15.2.3 Intellectual property rights protection
15.2.3.1 Patents
15.2.3.2 Trademarks
15.2.3.3 Copyrights
15.2.3.4 Licensing of technology
15.2.4 Market access barriers to patented pharmaceutical products
15.2.5 Registration of products in the Philippines
15.3 Price level of pharmaceuticals in the Philippines
15.3.1 General trends
15.3.2 High prices of pharmaceuticals in the Philippines
15.3.3 Philippine prices �not too high�
15.3.3.1 Recommendations
15.4 Pressures towards policy on cheaper medicines: price cuts and generics moves
15.5 Developments on policy for parallel imports of pharmaceuticals
15.5.1 Threat of parallel imports
15.5.2 Philippines pushing ahead with parallel imports
15.5.3 Philippines and India hold pharmaceutical cooperation talks
15.5.3.1 Philippines looks to Indian imports
15.5.4 More firms to cut Philippine prices?
15.5.5 The position of the PHAP
15.5.6 Improve competition/quality
CHAPTER 16 INDIA
16.1 Introduction
16.2 Issues in intellectual property rights protection
16.2.1 Government procurement
16.2.2 Export subsidies
16.2.3 Intellectual property rights protection
16.2.3.1 Patents
16.2.3.2 Copyrights
16.2.3.3 Trademarks
16.3 Patent-related issues in India
16.3.1 India�s new patent law
16.3.2 Public opinion on patent legislation
16.3.3 India moves to cut patent delays
16.3.4 India as a �Watch Country�
16.4 Regulation of pharmaceutical markets and trade issues
16.4.1 Government drug pricing policy
16.4.2 Import policies
16.4.2.1 Standards, testing, labelling etc
16.4.3 Investment barriers
16.4.4 Drug price liability
16.4.5 Potential exports/foreign sales
16.4.6 Identifiable damages to industry
16.5 Other policy areas
16.5.1 Anti-dumping measures
16.5.2 Outsourcing policy
16.5.3 Counterfeit products
16.5.4 Pharmaceutical benefits
16.5.5 Measures encouraging pharmaceutical investment
16.6 Pharmaceutical production in India
16.6.1 General trends
16.6.2 Cipla
16.6.2.1 Glaxo claims infringement by Cipla
16.6.2.2 Price cuts
16.6.2.3 Cipla leads Indian pharmaceutical launches
16.6.3 Zydus Cadila
16.6.3.1 Launches HIV/AIDS drugs
16.6.3.2 Near-future prospects
CHAPTER 17 THAILAND
17.1 Introduction
17.2 Intellectual property rights protection
17.2.1 Overview
17.2.2 Patents
17.2.3 Copyrights
17.2.4 Trademarks
17.3 Issues in intellectual property rights protection
17.3.1 Compulsory licensing
17.3.2 Patents
17.3.3 Draft Trade Secrets Law
17.3.4 Parallel imports
17.4 Intellectual property rights and enforcement
17.5 Barriers to market access for patented pharmaceutical products
17.5.1 Discriminatory duties
17.5.2 Restrictive formularies
17.5.3 Standards, testing and labelling requirements
17.6 Pharmaceutical parallel trade
17.6.1 Thailand as a producer of cheap pharmaceutical products for export
17.6.2 Thailand as a potential source of parallel exports
17.6.3 The role of activist and consumer groups
CHAPTER 18 CONCLUSION
18.1 Issues related to intellectual property rights
18.2 Pharmaceutical parallel trade and the broader context
18.3 Arguments for and against parallel trade
18.4 The debate on pharmaceutical parallel trade in the US
18.5 Other developed countries
18.5.1 New Zealand
18.5.2 Japan
18.5.3 Eastern Europe
18.5.4 Israel
18.6 Developing countries
18.6.1 Argentina and other Latin American countries
18.6.2 Brazil
18.6.3 South Africa
18.6.4 India
18.6.5 Thailand
18.6.6 The Philippines
18.7 Postscript
CHAPTER 19 POSTSCRIPT
19.1 Recent developments in equal access to essential medicines
19.2 The corporate side
19.2.1 Boehringer Ingelheim�s position
19.2.2 Bristol-Myers Squibb offers emergency patent relief
19.2.3 Merck Sharpe & Dohme
19.2.4 Intensification of competition among generics companies
19.3 The institutional side
19.3.1 Accelerated Access Initiative progress
19.3.2 Equitable pricing for developing countries
19.3.2.1 Access to essential drugs: four factors, five groups of actors
19.3.2.2 Differential pricing of essential drugs: what do we mean?
19.3.2.3 Experience to date with differential pricing: lessons for the future?
19.3.2.4 Framework for dialogue: questions, principles and options
REFERENCES AND FURTHER READING
USEFUL WEBSITES
EXECUTIVE SUMMARY
The focus of this report is a comprehensive and coherent review of the issues impacted by
globalisation in trade for the pharmaceutical and generics industries, the most important
of which are international sources of parallel trade in pharmaceuticals and the regional
and international exhaustion of intellectual property rights (IPR).
Within the broader context of global trade issues, the report analyses some of the issues associated with global trends in pharmaceutical parallel trade and highlights their application by examining a number of country case studies from the Organisation for Economic Cooperation and Development (OECD) area as well as countries from the low, middle and upper-middle economies in the developing world.
The report begins by providing a brief overview (in Chapter 1) of the practice of parallel import of pharmaceutical products and its status in national legislation in key economies and in the context of international law for patented goods and the World Trade Organisation/Trade Related Aspects of Intellectual Property Rights (WTO/TRIPs) Agreement.
The first section and the first three chapters of the report are then devoted to a more detailed discussion of parallel trade in pharmaceuticals, regional or international exhaustion of rights, compulsory licensing and the Roche-Bolar provisions, and the WTO/TRIPs Agreement. It focuses particularly on an analysis of the complexities of these concepts as they affect interactions between the developed and developing world.
Thus, Chapter 2 critically appraises the arguments for and against pharmaceutical parallel trade and in doing so discusses the legal, economic and public health arguments relevant to this discussion, by drawing on the international literature and experience.
Chapter 3 discusses the problems that developing countries have in terms of access to essential drugs, summarises the debate that has taken place over the past couple of years, particularly relating to the HIV/AIDS epidemic in many developing countries and provides an update of initiatives that have been undertaken to find a resolution to that problem, such as tiered or differential pricing.
Chapter 4 analyses the issues surrounding the introduction of Roche-Bolar (or early working) provisions as a means of promoting competition upon patent expiry and discusses case studies that have been heard before the WTO Dispute Panel, as well as draws upon the international experience, particularly that in Eastern Europe.
The second section of the report comprises three chapters, which analyse the situation regarding parallel imports in the US.
Thus, Chapter 5 provides the economic rationale as well as the legal and political background to the enactment of the Re-importation Bill by the US Senate and all bills related to parallel trade and/or pharmaceutical price controls in the US.
Chapter 6 takes the discussion about parallel trade further by referring to previous pieces of US legislation and discusses the relevant sections in the US legislation that protect right holders against parallel imports by third persons, providing a few benchmark cases that have ruled in favour of right holders and questions the entire validity and eventual applicability of what was discussed in the previous chapter.
Chapter 7 emphasises the complexity of the issues involved and the imperfections in IPR protection systems, in particular in the US, and highlights a few cases surrounded by controversy. These relate to the granting of compulsory licences on several occasions and proves that their award do not necessarily harm right holders.
Section three of the report reviews the evidence on pharmaceutical parallel trade-related issues from other OECD countries, ie Japan, New Zealand and Eastern European economies in transition (especially Poland, Hungary and the Czech Republic). The situation in the EU is specifically excluded, as a separate Scrip report on the subject has recently been published (Parallel Pharmaceutical Distribution 2000: A pan-European perspective, BS1069, August 2000).
Chapter 8 examines the background to the legalisation of (pharmaceutical) parallel imports in Japan, by drawing attention to specific cases. Chapter 9 discusses the New Zealand case, by drawing attention to the role of Pharmac, and the recent amendment to the Copyright Act legalising parallel trade. Chapter 10 reviews the issues surrounding parallel trade in a number of Eastern European countries in transition, particularly those in line for accession to the EU.
In section four of the report, a number of middle- and upper-middle income countries are reviewed. In Chapter 11 the South African experience reveals how national policy on IPR and pharmaceutical regulation can become intertwined and create an environment for dispute. South Africa is par excellence one of the countries that have suffered most from the AIDS epidemic and have sought to take action by issuing (or threatening to issue) compulsory licences or importing (or threatening to import) cheaper medicines from third countries.
Chapter 12 reviews IPR issues in Argentina and other smaller Latin American countries and, with regards to Argentina, it highlights the friction that has developed between Argentina and the US over the former�s perceived weak IPR protection.
Chapter 13 reviews the Brazilian experience with IPR protection, whilst at the same time examining the country�s change in policy direction in terms of encouraging the consumption of generic pharmaceuticals and building domestic capacity for much needed essential drugs, which may still be under patent protection.
Chapter 14 discusses Israel and other Middle East countries. The debate on Israel focuses on the legalisation of parallel imports, and particularly in light of the strength of the local biotechnology industry. The discussion on the other countries focuses more on providing an update of their IPR provisions.
Section five of the report outlines the evidence and discusses the issues from some low- to middle-income countries� point of view. This section comprises three chapters: the Philippines (Chapter 15), India (Chapter 16) and Thailand (Chapter 17).
Finally, Chapter 18 brings together the conclusions arising from the five sections of the report and Chapter 19 provides a postscript on very recent developments.
© PJB Publications Ltd. 2001
All rights reserved.